Article De Nationale Franchisegids: “Prejudicial questions about ‘sharing the pain’ – rent reduction due to corona” – mr. K. Bastiaans – dated May 11, 2021

In the past period, the case law has not been idle when it comes to the question of whether a tenant can claim rent reduction in the COVID era.

The general line shows that a tenant is in principle entitled to this reduction, provided that it can be demonstrated that the tenant has actually been affected by the pandemic. Many judges choose to divide the pain; 50% is for the account of the landlord and 50% for the account of the tenant.

One of the questions often asked during such proceedings is whether a government-mandated closure should be qualified as a defect within the meaning of Section 7:204(2) of the Dutch Civil Code and should therefore lead to a reduction in the rent. in connection with loss of rental enjoyment pursuant to Article 7:207 of the Dutch Civil Code.

The fact that this question has not yet been settled is apparent from the judgment of the District Court of Limburg of 31 March 2021, in which it puts four preliminary questions (legal questions from a judge to a higher court regarding the interpretation of a rule of law) to the Supreme Court.

In this case there was a dispute between the (main) lessor and the Heineken brewery as lessee. There was also a sublease agreement between Heineken and a catering entrepreneur. As a result of the COVID-19 pandemic and the resulting crisis, Heineken, urged by Koninklijke Horeca Nederland, decided to accommodate its catering tenants by waiving two months’ rent. Heineken, in turn, has submitted a request to the main lessor for a rent discount. However, he refuses to cooperate with that request. However, Heineken did implement its proposal, which is why the landlord has initiated legal proceedings and is seeking a declaratory judgment that Heineken is not authorized to pass on this rent reduction. Heineken, in turn, counterclaims that it is entitled to reduce the rent for the aforementioned two months by 50% on the basis of the defect regulation.

The subdistrict court ruled that, although there is a social need to divide the damage suffered by the corona measures between tenants and landlords, it is not clear whether and how this can and may be legally shaped. Because the legal embedding determines the standards against which these and similar issues must be assessed, the subdistrict court considers it useful to ask the Supreme Court preliminary questions about this. Furthermore, there are currently many lawsuits on this issue nationwide and many more are expected to follow. That also justifies asking these questions for a preliminary ruling. The assessment of the dispute will therefore be deferred until the decision of the Supreme Court.

The subdistrict court has asked the Supreme Court the following questions for a preliminary ruling:

  1. Should the closure of the catering industry imposed by the government as a result of the corona crisis be regarded as a defect within the meaning of Article 7:204 paragraph 2 of the Dutch Civil Code?
  2. If so, on the basis of which criteria should the degree of rent reduction be assessed?
  3. (Or) does the restriction in the use of the leased property constitute an unforeseen circumstance that may lead to a reduction in the rent?
  4. If so, which circumstances of the case are taken into account when determining or apportioning the damage?

The Supreme Court has not yet issued a decision on the questions. Until then, one will therefore have to link up with the existing jurisprudence. This does not detract from the fact that careful consultation between parties is and remains important and in these strange times the franchisor, franchisee, lessor, bank, supplier and other stakeholders would do well to actually share the pain.

Ludwig & Van Dam lawyers, franchise legal advice.
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